SC Medicaid director touts agency savings

South Carolina's Medicaid director said Thursday his agency's savings initiatives are allowing tens of millions of dollars to be spent on the state's many other needs.

Under the Department of Health and Human Services' preliminary budget request last fall, the escalating cost of Medicaid would have eaten up every dollar of additional revenue currently projected to come into state coffers next fiscal year.

But Gov. Nikki Haley's executive budget proposal recommends spending an additional $156 million. That's about $40 million less on the government health care program for the poor and disabled than that initial request.

Director Tony Keck told the House budget-writing committee that won't be a problem, saying the initial report was out before his agency could calculate savings from various initiatives. That included lowering administrative rates to managed care organizations and ending payments for unnecessary early deliveries, which were being scheduled for convenience but are more expensive and can result in even more costly intensive care stays.

Other initiatives to clamp down on costs are in the works, he said.

"We can spend less money on health care and get better results," Keck told the House Ways and Means Committee.

The federal government also slightly increased its share of the joint state-federal program, with the fraction of a percentage point resulting in $10 million less for the state to spend, he said.

The agency's revised budget calls for spending $6.5 billion on Medicaid in 2013-14, with $4.5 billion of that coming from the federal government.

Keck also explained his agency's decision to shift more Medicaid money to the state's small, rural hospitals next year. The 19 designated hospitals will be fully compensated for the cost of caring for people without health insurance, as Haley announced in her State of the State address Wednesday.

He said it's part of the agency's effort to focus on hotspots of poor health and disparities.

This year, the $461 million Medicaid fund covered about 60 percent of the cost of uncompensated care at hospitals statewide. But rural hospitals have a much higher share of patients who can't pay and are much sicker, Keck said.

"We're trying to focus limited money on places with the most need," he said. "We'll inject $20 million annually into rural hospitals. It's a shift of money from where it's less needed to where it's more needed."

His presentation came as Democrats urge the Republican-controlled Legislature to expand Medicaid eligibility under the federal health care law. Haley repeated her opposition to the idea in her speech Wednesday. Keck, a member of Haley's Cabinet, also opposes covering an estimated 344,000 additional adults in South Carolina.

The federal government pledges to pay 100 percent of the added cost of newly eligible adults for the first three years, and 90 percent later.

"This is the deal of a lifetime," said House Minority Leader Todd Rutherford, D-Columbia, calling it a moral obligation to accept the coverage.

He and other Democrats contend Republicans are refusing to participate for ideological reasons that neglect the state's neediest.

But Republicans argue the state can't afford that eventual 10 percent and contend efforts to cut the federal deficit could leave states funding a much higher share.

Keck said the state needs to focus on improving the current system and reinvesting efficiency savings in improving residents' health.

The likelihood of Democrats winning their fight in the Republican-controlled Legislature seems slim. Democrats will try to get it passed through a budget clause. But the House's GOP majority is at its largest since Reconstruction, and that caucus has made refusing the expansion a priority for 2013. Though the federal law takes effect next January, the state doesn't have to decide on the expansion this year.

Rep. Harry Ott, D-St. Matthews, applauded Keck for his work.

"I predict you'll eventually expand Medicaid," he said. "The timing of when South Carolina decides to expand is what you and I may have a difference of opinion on."